1.

A Ltd. issues 50,000 8% debentures ata discount of 5%. The tax rate is 50%. Thecost of preference capital is :​

Answer»

Answer:

Assuming that a firm pays tax at 50% rate, compute the after tax cost of debt capital in the FOLLOWING CASES:

(i) A PERPETUAL bond sold at par, COUPON rate of interest being 7%;

(ii) A 10 year, 8% Rs. 1.000 per bond sold at Rs. 950 less 4% underwriting commission.

Solution:

Solution

iii. Cost of Debt Redeemable


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